For the Love of the Work
Alumni Panel: CSL Entrepreneurs
By Doug Peterson
The Thanksgiving of 2000 was one of the worst in memory for Prith Banerjee. His start-up company was deeply in the red and there appeared to be no way to cover the costs.
Problems started in July of the same year when Banerjee sent the business plan for his new company to three venture capitalists. One of the VCs signed a term sheet and Banerjee quickly concluded that raising money for a new company was easy.
"I thought, 'Why didn't I start a company earlier?'"
While negotiations were still going on, the VC encouraged Banerjee to lease an office, purchase computers and prepare to build his staff.
"But the day before we were supposed to sign this deal for a couple of million dollars, the technology bubble burst," Banerjee said The venture capitalist backed out of the deal, leaving Banerjee with sizable debt.
He said he seriously considered calling it quits but fortunately didn't because "the fact that they did not put money in has made this company much better."
According to Banerjee, when the VC pulled out, they were forced to talk with customers and they started bringing in revenue from a small company with which they partnered. They also found out that the product they were planning to develop would have been totally wrong.
"Nobody would have bought it," he said. "So we clawed our way through, got a very good refinement of the product, then got funding in the middle of 2001."
Banerjee's advice: "In business, until the check is in the bank, it is not a done deal."
Banerjee was one of four CSL alumni who formed an entrepreneur panel at the laboratory's 50th anniversary celebration in the fall of 2001. They had plenty of stories and advice for other academicians who might be considering a similar venture into business.
One panelist, Ram Chillarege, left a comfortable job in IBM to start his own company. But everyone around him seemed to think it was a bad idea. Everyone but potential customers.
"I talked with customers and they liked our ideas," Chillarege said. "But then I talked to the experts and they said you've really lost your mind because this is never going to fly. So I sat back and thought about it and then put some money behind the idea.
"The lesson that I learned is to follow your gut, especially if you have a customer you're connected with," he added. "It's worked well more than once."
Shashank Goel, another panelist, said that when he started a new business with two CSL partners, they looked to California. On one visit West, they were meeting with a venture capitalist and debated whether they should pay a little extra to rent a car that came with a cell phonea new feature at the time.
"We decided we wanted the cell phone because it would make us look really important," Goel said. "But who was going to call us? Nobody knew our number."
As it turned out, that cell phone played a key role during their meeting with the venture capitalist. During the presentation, out of the blue, the cell phone began ringing, even though no one knew they had the phone.
So Goel picked up the phone and began talkinga conversation that evidently sounded like he was talking to another VC. Immediately, the VC they were meeting with said, "You don't have to go to anybody else. We can close the deal in a week."
That was the beginning of Simplex Solutions, a company that provides verification software and silicon engineering expertise for complex systems-on-chip.
For any technologists considering a start-up company, Goel's advice is that you have to learn to sell. "You're starting a company, you're a salesman," he said. "You've got to learn to send flowers to the customer at the right time."
Chillarege echoed this, pointing out that "when you get into business, a business is there to make money. So internalize that or partner with somebody who understands it."
However, Chillarege added, it's a fallacy to believe that those who start companies are in it purely for the money. "We mostly do it for the love of it."
Entrepreneur Panel Members
Prith Banerjee, Machine Design Systems
Wu-Tung Cheng, Mentor Graphics Corporation
Ram Chillarege, Chillarege, Inc.
Shashank Goel, Sequence Designs, Inc.
Moderator: Professor Janak Patel